BUSINESS PLUS EXPERT
New Product Innovations and
Launching Strategies
by Leigh Cowan
Perhaps the problem with new product innovation is nobody knows that they can’t
live without your product or service, yet. In
fact, launching in established product categories requires a very different approach
to new innovations.
To understand the marketing, lets define ‘innovation’: There are three basic
types of product innovation:
Continuous Innovation
A Continuous Innovation is simply a new model… the same idea, with a minor
facelift or design tweak where there is no learning
curve for consumers. For example, the latest
model toaster, electric knife or blender…
are simply continuous innovations.
Other examples are this year’s
new VW Golf, Toyota Corolla
and Porsche 911.
Dynamically Continuous Innovation
A Dynamically Continuous Innovation is where two concepts or more are
combined, so there is a ‘learning curves’ but buyers can easily understand the
product idea. For example, the disposable lighter which takes the concept of a
lighter, with the concept of matches, to provide the combined benefits of both.
A recent dynamically continuous
innovation is a Dutch space-saving
idea in a housing project… They
joined a sink and toilet at the hip
(left) and stumbled upon a simple
design that could save thousands of
gallons of water.
Other examples of Dynamically
Continuous Innovations are the iPod,
hybrid cars like the Toyota Prius, the
impending 3D television.
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The Business Issues February 2010
Discontinuous Innovation
A Discontinuous Innovation is one
that that requires new experience,
understanding and learning to be able
to be used properly. The classic example is the microwave oven, which took
20 years of dormant activity before
being accepted by the market place.
So why is it hard to
launch new innovation
product& services?
The answer lies in understanding the
secret of good marketing, Market
segmentation. The most common
reason business fail is in assuming
that all potential customers are
cookie-cutter replicas of each other.
Knowing the need and wants of
attractive segments, being able to
identify them meaningfully and
communicate with them cost effectively, means productive manipulation of the elements of the marketing
mix and progressive addressing of the
six stages of buyer read
Understanding
Buyer
Readiness
states, in relation to market segmentation, leads to clarity of management
decision making, ensuring the right
communications strategy is employed
to generate optimal return on investment from your promotional mix (the
balance of advertising, sales promotions, PR and personal selling).
The simple rule is you MUST always
focus on the first of the weakest state,
being mindful that the earlier stages
constrain the following ones: If only
10% of the target audience are AWARE
of your product, then only a propor-
How to successfully
launch technical
innovation
tion of that 10% knows about it, likes it, prefers it, is convinced they should buy
it, and do so. This means, even if you have everything else right, only 10% of the
market will buy… Double awareness and your sales will double. Of course, some
companies, get ‘stuck’ on awareness and forget to move into the five other stages.
The base problem still comes down to imperfect market segmentation… making
businesses market themselves inefficiency, pushing cost of sales up, and profits
down. Weak marketing communications don’t acknowledge buyer readiness
stages, and that creates more problems. Or sometimes, management has
neglected to create and follow a formal and comprehensive marketing plan,
making marketing effort disjointed and ineffective.
In fact many continuous and dynamically continuous innovations are victims of
simple ‘market homogenization’ by management, spawned from weak or nonexistent marketing planning that also undermines operational marketing
activities.
In the rare instance of new-to-the-world,
truly discontinuous innovations,
the rules are a bit different
For new, raw, immature, and uneducated or uninformed markets, ‘segments’
don’t exist, just different mind-sets. The secret of success is in the nature of the
Buyer Adoption Curve, and understanding the Marketing Gap.
There is an excellent marketing simulation software tool, called “Markstrat™”
that is used in better marketing schools around the world, that contains a simulation of an established growing market with segments, and a new innovation
developing market that requires understanding of the marketing of innovation.
The lesson learned is that segments don’t develop immediately, and markets
are always in a constant state of change.
(Few people believe that Coca Cola invests up the 3% of its sales turnover in
market research. Those that do shake their heads in acknowledgement of the
fact it is the world’s most highly valued brand; not because of some magic or
‘luck’ but simple scientific market segmentation. )
Studies of the buyer adoption process
show us that there are different
characteristics constantly common to
the adoption of new innovation.
“Innovators” represent around 2.5%
of any market. Understanding the
nature of innovators, helps us build
winning product launches: They are
’enthusiasts’ in the field of your
innovation, at the younger end of the
age spectrum, with high disposable
income, and a real thirst for knowledge. They are a little more educated
than average, and likely to influence
“Early Adopters”. The will seek out
information, and go through a bit
more ‘pain’ to try your product,
searching it out, paying a bit more,
struggling through the learning
curve, just so they can be first to use
it.
They are followed by “Early Adopters”
up to 13.5% of the potential market,
who have less pioneering spirit but
still a thirst for newness, experimentation, and novelty. They will also
suffer some pain in terms of ease of
use, price, availability, learning curve
and other barriers to easy adoption.
They have a boredom threshold too,
so don’t be too long in adjusting your
marketing mix to them as they will
move on to the next thing and forget
you unless you secure their elation…
in which case they become evangelists
for your products and can almost
guarantee greater market adoption;
This is key because at this point
marketers face their greatest threat…
“The Marketing Gap”.
Those that shake their heads and say, ‘we
can’t afford market research’ are wrong. In
these days virtually every business already
has captured the information they need, they
just don’t know how to use it.
The Business Issues February 2010
37
BUSINESS PLUS EXPERT
Not the full story
The science of marketing is far more
complex than can be explained in
1200 words… and there are complexities to the above that add more thrills
to the job of launching new innovations, but the tools explained are
likely to help many companies in
most situations.
For more information readers are
invited to peruse www.launchengineering.com and help themselves to
the various free downloads available.
The following group, 34% of the
population is where the big money is
to be made… not form margins, but
from volume. Products that fail do
not cross ‘the gap’ to the group. The
mean reason is that the marketing
mix has to change, radically, and too
many businesses cling to the successful strategies that have worked in
attracting innovators and early adopters The Early Majority won’t have a
bar of that! They will refuse to adopt.
The product or service falls into the
marketing gap… and fails!
Upon securing a large chunk of Early
Adopters, businesses MUST change
their marketing mix to meet the
characteristics of Early Majority, or
sales will just decay, and the product
will ‘fail’.
They want easy access.. that means
mass distribution. They want lower
prices. Not a little – a lot! This means
a company has to have generated cost
advantage methods and be able to
produce much cheaper than it could
when it was servicing innovators. Fail
here and it is over.
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The Business Issues February 2010
Early Majority need a totally different
type of promotional mix… easily
understood appealing, relevant, satisfying the buyer readiness stages you
expect them to experience. The product has to be easier to use, to install,
to assemble, to apply or understand.
Manuals have to be foolproof,
instructions absolutely simple and
appearance must meet or surpass
their expectations. Use and design
must be intuitive and foolproof.
Once Early Majority is pleased and
adopts your products the rest
becomes easier. The “Late Majority”
will respond to greater price incentives and follow when perceived value
improves.
“Laggards”, the final part of the
market may never adopt. This 16% of
the market will resist the innovation
preferring habitual alternatives until
forced to change. At this stage the
marketing mix must change again. An
example might be to reduce advertising, assuming the market needs no
further information, and investing
into political lobbying to make you
product mandatory or obligatory.
Leigh Cowan is a leading authority on
marketing strategy, brand management, marketing communications and
FMCG product sampling, currently
employed as a strategic marketing
consultant with Launch Engineering, a
marketing research and strategic
planning consultancy operating out of
Sydney Australia.
Over his career, Leigh has taught in
post-graduate MBA and undergraduate Universities in Sydney, enjoyed a
25-year
career
of
extraordinary
marketing achievement, as Marketing
Director in FMCG, as well as B2B,
roles and has assisted major national
and
international
companies
to
achieve record-breaking sales and
profit results, and is recognized as an
influential thinker in management and
marketing strategy having developed
marketing models including the Law of
Negative Brand Equity.
In 1984, even before he completed his
rigorous university studies, he was
awarded an AFAMI, a prestigious
professional recognition awarded for
commercial marketing achievement. He
is the author of numerous marketing
articles.